A coinsurance provision requires the insured to carry a stated percentage of the property's value. If the insured carries less, the insurer pays only the share of a loss that the insurance carried bears to the insurance required, so the insured shares in the loss. It does not change the limit itself.

The formula: - Required insurance = value × coinsurance percentage. - Payment = (insurance carried ÷ insurance required) × loss, never more than the limit. Meeting the requirement means the minimum limit equals the required insurance. Example: a home that costs $450,000 to rebuild with an 80% requirement needs at least $360,000.

Partial loss example: replacement cost $600,000, 80% requirement, so required insurance is $480,000. The owner carries $360,000, which is 75% of required. A $40,000 loss pays 75% × $40,000 = $30,000. A common error divides by the full $600,000 and skips the percentage step.

Read the policy for two details. Some policies subtract the deductible after applying coinsurance; in the example that would leave $30,000 − $1,000 = $29,000. Some homeowners loss settlement clauses pay the larger of the actual cash value of the damage or the coinsurance amount, up to the limit.